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Gold/Mining/Energy : Barrick Gold (ABX) -- Ignore unavailable to you. Want to Upgrade?

To: Enigma who wrote (2499)	5/5/2002 10:48:36 AM
From: nickel61	Read Replies (1) \| Respond to of 3558

Well we do have a different opinion. Russet is a believer in the complete irrelevance of gold as a currency that is not dependent on the credit worthiness of anyone. I think that all fiat currencies are suspect in that they are merely promises to pay if we have the creditability to pay. A very weak premise in light of the towering leverage of debt that supports most countries fiat. You and Russet think all is well. I think you are missing the main point. Russet wants to argue that Barrick accounting is somehow worth wasting time analyizing, I think that their corporate structure of financial hedging on and off balance sheet is based on a hope that the US dollar will always continue to appreciate against gold. To me that is silly. I think both Enigma and Russet have some valid points, but both of you differ from me in that you believe in the promise that management wants you to believe that somehow 18,000,000 ounces of gold will be able to be produced to cover the ounces already sold forward, without completely destroying the pyramid of financial machinations that Barrick has put in place with these short sales. Good luck. None of us know exactly what Barrick has on it's balance sheet exposure nor what it chose to put on it's off balance sheet exposure, because Barrick and it's bankers don't want to have any one know. That doesn't mean that I trust that everything will work out well. It only means that maybe there is a good reason why the Barrick insiders are not owners of their own stock. To say that resources are somehow the same as reserves and can somehow magically be brought forward to satisfy the need to deliver gold into their hedges is silly. I don't know whether you and Russet know that it is silly and are somehow willing to trust the Barrick management to wave a wand and continue delivering regardless of the geologic reality or if you are just ignoring the fact that mining seldom allows the niceity of having economic resources be so available to current production assets. Anyways in acting as a professional investor for twenty five years I have learned to take many "new" financial structures with a very large grain of salt. They often tend to have imbedded assumptions that are not disclosed to investors until it is too late to avoid disaster. I have tried to illuminate where some of these possible fissures might lie...we all will find out as the future unrolls and the bets Barrick mangement have made come into sight out of the hidden realm of off balance sheet accounting. In this enviroment high grading to meet the need to deliever low cost production requirements is endemic and a management that claims the only reason they are totally unable to deliver any gold that is unhedged this year is because of a merger with Homestake, is ridiculous. What they didn't know that Homestake had these hedges in place when they bought them? The real bottom line is that the era of hedging was based apon a cooperative agreement between the masters of the monetary policy of the US and UK, with the consent and agreement of Europe to allow the US dollar to appreciate to allow the purchasing power of the US consumer led economy to fuel a spurt in world economic activity from roughly 1994 onward..part of this required the forcing down of the spot price of gold. The evidence that this occurred is significant but both Enigma and Russett differ with me about this point. Fine, but the enviroment has changed and now to be hedged is to protect yourself from a rising price of gold...a strategy that is rather foolish for a gold producer...no one is going to change any of our minds..I post here simply to make the other Barrick shareholders(the lurkers) aware of what is going on that might undercut their investment.. IF you chose not to agree fine. We will see how it plays out...The proof will be in the future and we all shall see it unravel before our eyes. Two years ago Barrick could argue that their strategy made sense now it is clearly wrong headed. I know a great deal more about accounting then you think I do, what I do not know is what the Barrick accountants wanted me to know, and what they didn't. If Russet finds calculating reported cash flow for Barrick somehow meaningful to him fine, to me the more important question is what level of US dollar gold price is likly in the future with a rapidly declining US dollar, and how exposed is Barrick to being hoisted on it's own pretard, by a hedging strategy that fit the last seven years very well but is absurd in the emerging gold bull market....On basic, my difference with Russet is that he doesn't believe that a bull market in gold is possible, witness his return again and again to his flawed analysis of the gold price over the last hundred years in US dollar terms. Wake up man, THE US DOLLAR IS NOT CONVERTIBLE INTO ANYTHING>>>>what it did when it was measured in gold is different then what it will do when it is measured in how solid its banking systems loans are....A gold bull market is another way of saying that the value of the US dollar will not be sustained...If you disagree with that then fine but the market is already voting on that issue as we speak. I hope that Barrick's hedging structure is flexible enough to react to that reality. I doubt that it is.